econ100511 - Microeconomics Oct. 5th, 2011. Marginal...

Microeconomics Oct. 5 th , 2011. Marginal Utility Why individual's demand curves are often downward sloping. The Big Picture – We get pleasure from things. But we get sated and get less and less additional pleasure the more we already have. This is diminishing marginal utility – Because of this, we will buy more of anything only at ever decreasing price. Individual demand curves are downward sloping. – In the orthodox model, aggregate demand curves are the sum of the individual curves. This require an extreme assumption of independence of individual choice. Marginal utility diminishes because of satiation – “Marginal utility” is the extra pleasure we get from consuming one more thing. – Marginal → always one more thing – Pleasure decreases with more – It diminishes because we become “sated” - we have had enough. Marginal Utility diminishes – The more you have, the less you want more – Things are less exciting when you have a lot – IF you had increasing marginal utility for just ONE thing, it would become your LIFE

This preview
has intentionally blurred sections.
Sign up to view the full version.